johnjohn1hew

Something i felt like contributing to the thread. I guess this is what someone would call price-discovery. Traders are always searching for trades. If they cannot find these, then price moves (representing this search). When they have found trades, then price will move sideways until traders once again have to search for trades. Example: when price is rising the majority of the sellers are finding prices too cheap and are withholding their selling orders until they find prices to be high enough. Since price is rising, the buyers are obviously agreeing with the sellers that price is too cheap. When price arrives at a suitable level to the sellers, they will start to sell and whatever buyers are left will buy. This will most likely lead to a congestion (representing an area at which a lot of traders are willing to trade with each other), from which price will leave once traders no longer agree on value. The trend is a result of a disagreement and the congestion is the result of agreement.

For me, a volume+price action approach is more useful and conclusive when price is at a level of importance. I would like to analyze volume+price when they are at a level of prior resistance or support. Without these levels i would have to say that coming to any accurate conclusion would be quite hard as when price is not at one of these levels, it is either heading to one or is establishing a new one.

In response to #76 **Hinges do not necessarily have to take place after a period of instability, they can take place anywhere, after anything. **A breakout is not necessarily caused by position covering, but can be caused by any form of buying/selling. A hinge just represents a balancing of the market forces, thus why it indicates the end of the old and beginning of the new. It is an occurrence where neither side has an inclination to see price head anywhere, represented by the traders' lack of participation. What ever buyers are willing to take price up, realize that they will most likely just be overcome and price will go back down and the sellers do the same thing when they are getting closer to the support. These movements become smaller and smaller until price is practically a straight horizontal line.

A sound theory is a theory that can be defended. If you cannot defend a theory, then you have no place in pushing it. You stated that human reasoning can be formulated, and i want to see this. Otherwise i have to stick with my belief that quantifying human reasoning is impossible. I do not acknowledge those who want to appear smart, i acknowledge those who can be smart and can convince the opposition without feeling offended and just throwing in the towel. In no way will i ever alow a disagreement to become personal.

Mr. Tams, quantify it for me. Please, i am dying for this formula. If you say this then you must be saying that Wyckoff's methodology (which we all know works) is incomplete or non-scientific, as he never gave a quantitative way of using his method. His method was based on the underlying forces, of which have nothing to do with formulas and everything to do with mental reasoning.

The first person to give me a quantitative formula for doing this will be given a big con-grat-u-*******-lations! You did the impossible.

What volume is, is not up to an individual's discretion. Volume is the quantity of contracts (or other vehicles) traded. PERIOD. Volume and price are instantly plotted at the same time as volume can not be plotted without a result in price and price can not be plotted without an appearance in volume. Traders make volume and volume is plotted at the same time price is created. Price is the price at which traders have traded. Price does not lead volume and volume does not lead price. Ideas of movements (which are opinions of the future direction of price) lead volume and price (i.e. traders' actions lead price, which are represented on the chart as volume and price). So one could say volume and price leads volume and price. When Wyckoff (or whoever stated it first) said that volume is the effort and price is the result, he was not pulling this out of his ass, he was stating the obvious. If you submit a market order to buy one contract you are adding 1 unit of volume to the volume bar and one point in price to the chart AT THE EXACT SAME TIME. Wyckoff, Livermore and the other price action (+volume) gurus realized the obvious and traded accordingly.

No formula can predict the next movement in price. Price is random and takes reasoning skills to decipher. Skills that cannot be mimicked by a forumla. It is absolutely foolhardy to assume that anyone holds such insight to be able to predict the next movements of a collective human mind 100% of the time.

Price can only rise when demand is greater than supply. And in your case demand is greater than supply as the sellers realize that prices are too cheap and so they withdraw and wait for higher prices. If the buyers share this sense, then price will rise as they try to find sellers. Also, we can only call the demand present at any given moment "true" as we have no way of knowing the targets of the sellers (if they even have targets) until we reach them. Hopefully this makes sense.

Wyckoff said that hinges represent the end of one chapter and the beginning of another. So basically i believe hinges to be the re-balancing (unwinding) of the market that follows a period of instability (trends and wide ranges). The traders in hinges are continually unwilling to take price higher and lower as they are aware that in this range, they are constantly going to be trimmed by the opposing force which resides in the direction in which they are taking price. So this is represented on a graph by declining volume coupled with lower highs and higher lows. The breakout of this pattern could be caused by covering shorts/long or by new bulls/bears. Since the majority of the traders are out of the market, they will most likely re-enter when they see a new opportunity in the direction of the breakout (the beginning of a new chapter).

The Time Element. The sudden increase/decrease could catch most traders off-guard and really test their reasoning ability. They do not know whether to support or resist the move and those trade who do act on the move, are most likely to go with it, adding to its force. Here is an analogy: if a cinder block falls on my head, am i going to be able to act quickly enough to decide to go to the hospital? No, I will need time to evaluate the severity of the situation and the overall damage before i come to a conclusion as to what i am going to do next. So basically the movement after a sudden rise or fall is left up to the opinions of the majority of the traders since there will most likely be a lack of support + resistance in all cases.

This is me trying to get this thread back on track for the volume curious. I attribute gradual rising volume with rising price as meaning more buyers (demand). A substantial trend can take place on low volume, this is even an indication of strength. When price rises and so does volume, then you have a gradual acceptance of price by the sellers. More and more sellers are coming into the market (dustribution), possibly indicating a turn is to come. In short, if prices are rising there is more demand than supply. If price are falling there is more supply than demand. The buyers have to search higher for sellers (D>S) and the sellers have to search lower for buyers (S>D). One will need an understanding of market structure in-order to fully grasp this theory. I learned it by studying the DOM ladder.

Here is a chart of the YM.

The Time Element - Tape Reading and Market Tactics, by Humphrey H. O'Neil (1931) Humphrey H. O'Neil introduced 'The Time Element' to me. This is an obliteration of the price-structure due to the inability of the traders to act fast enough to support or resist a sudden panic or boom and its following movements. He states that "humans need time for the return of reason following such shocks. How long did it take you to get over the the emotional effects of the car crash?" I took this theory to mean that if a sudden rise or decline were to take place, the stabilization period would take a whille to form as the traders would need enough time to reason the market, its meaning and its future developments.

This book is fantastic. This book contains some real gems, of which Studies in Tape Reading, Tape Reading and Market Tactics, and Psychology of the Stock Market are my three favourites.

Here is a quote from Pyschology of the Stock Market, by G.C. Selden (1912). The fact will at once be recognized that the above description is, in essence, a story of human hopes and fears; of mental attitude, on the part of those interested, resulting from their own position in the market, rather than from any deliberate judgment of conditions; of an unwarranted projection by the public imagination of a perceived present into an unknown, though not wholly unforgetable, future.

In this thread bring forward your understanding of the psychological factors inherent in the markets. Donate examples, quotes, charts - anything and everything.

Gradually rising volume on a rise makes sense, as more and more buyers are participating. If volume was rising and price was not keeping a consistently strong uptrend, then that is a sign of a growing presence of selling. Declining/low volume on a pull-back is a good indication of strength as the bears who want to short are few and the profit taking by the scared longs is not substantial. Then a rise out of the pull-back on rising volume is a good sign as, once again, more bulls are participating and possibly whoever shorted/sold during the pull-back are now covering and/or re-entering. An entry would have been at the beginning of the rise, if you were able to judge price action and/or volume accurately to sense weak selling and stronger buying or in one of the pull-backs. For money management, my stop would have been continuously moved to below the pull-back low, and if i sensed a weakening of upwards strength, then i would have either waited for price to hit my stop or i would ave just exited.

Hey guys, i have some questions about time and sales. Are the trades that appear on the tape filled already? If so, why is there only one trade quantity displayed when there are two sides to the trade (the buy at the ask and the sell at the bid)? Thanks.